Uber misclassification case settled for $1.3 million

5,200 class members involved

Posted January 8, 2019

Drivers from all over the U.S. who were engaged in the North Carolina federal case argued that the transportation service company misclassified them as independent contractors and that they were, instead, employees entitled to minimum wage and overtime. They claimed that they lacked discretion in the performance of their employment relationship with Uber and had no independence in performing their work. They were able to secure fares only through the company’s mobile application, which governed every aspect of their services.

The drivers, therefore, felt they were employees, entitled to basic wage protections such as expense reimbursement (i.e., gas, cost of insurance, lease payments, and repair, among others), overtime pay, rest- and meal-breaks, and other employment-related benefits. The company disagreed, but settled the case.

Under the agreement, Uber will pay a maximum gross settlement amount of $1,304,250. Of that total, $734,294.74 (56.3%) would go to class plaintiffs who have opted in, $434,750 (33%) would be paid in attorneys’ fees, and $90,205.26 (6.9%) would go towards litigation expenses. Of the remaining 3.5%, the parties agreed that $5,000 would compensate the named plaintiff for his assistance to the case and $40,000 would compensate the settlement administrator. Plaintiffs will receive amounts ranging from $50 to almost $5,000, and the average payment for class members is about $140.

In exchange for the monetary payments, class members who have deactivated their Uber accounts or who have not fulfilled a ride request on the Uber application for at least one month before September 28, 2018 (the date of execution), waive their right to future account reactivation and agree not to seek or accept future account activation or reactivation. Those with active Uber accounts agree to be bound by a new agreement and to waive their rights to opt out of the arbitration provisions in this or future agreements with Uber.

Employers often struggle with who they may categorize as independent contractors as opposed to employees, particularly with the continuing rise of the gig economy. To determine whether a person is an employee or an independent contractor, the company weighs factors to identify the degree of control it has in the relationship with the person. Making this determination isn’t always easy. Employers need to define the nature of the employment relationship under the regulations of several agencies, including the Internal Revenue Service (IRS), the U.S. Department of Labor, as well as state unemployment, workers’ compensation, and tax agencies. Each agency has different means of distinguishing between “employees” and “independent contractors.”